Where offices are filling up fastest

By By AUBREY COHEN

on March 15, 2013 2:31 PM

One sign of the economic recovery is that office space in key markets is filling up fast. But the long bust means little new space is under construction in the nation's 34 top urban office centers.

"In nearly all markets besides a handful, large tenants will have few existing options to consider and thus will be forced to look at proposed development options if they desire to explore relocation," real estate company Jones Lang LaSalle reported Friday, focusing on what it calls "Skyline" markets.

Nationwide, Skyline markets have a 13.4 percent vacancy rate -- still above the historical equilibrium of 12.2 percent, but on the way down, according to Jones Lang LaSalle. Meanwhile, just eight of 34 Skyline markets have office buildings under construction and just three of those have speculative construction. In fact, 65.6 percent of the square footage under construction is already preleased, Jones Lang LaSalle reported. That's 16.1 percent above 2011, which was the next-highest rate in the past decade.

The squeeze has already started hitting rents, which posted an effective growth rate of 4.5 percent last year, compared with just 1.6 percent in 2011. That said, Skyline markets are still approximately 18 months from hitting prior peak levels, Jones Lang LaSalle predicted. The tightest markets are those heavy on technology, including Seattle and Bellevue.

Here are the nation's eight "primary" Skyline markets, ranked by net absorption as a percentage of total inventory, starting with No. 8. New York, where the rate was -4.3 percent last year, with a vacancy rate of 12 percent and a 3.2 percent increase in rent from 2011. less

One sign of the economic recovery is that office space in key markets is filling up fast. But the long bust means little new space is under construction in the nation's 34 top urban office centers.